Non-compete agreements - another horror story

Q: When should you write the non-compete agreement for your business? A: Never.

Consider this story from Business Week:

What makes an effective noncompete agreement? Stephen Skertich found out the hard way. In 2001, Skertich bought Pro Med Staffing, an Orland Park (Ill.) nurse staffing company with about $3 million in sales. He drew up noncompete agreements for his six employees, a standard practice in the staffing business. In 2006, when one of his scheduling managers bolted to a competitor, Skertich was glad he'd taken precautions—especially after nurses who had been using Pro Med to find work switched to the competitor. But when Skertich consulted with his attorney, he learned his noncompetes probably wouldn't hold up in court. They were too broad, limiting neither time period nor geography. "Even though we hadn't been hurt that badly this time, I realized next time it could certainly be worse," says Skertich. His new noncompetes run for one year and cover seven nearby counties.

As Skertich discovered, the devil is in the details. States differ in their approaches to noncompetes. In California, they are practically unenforceable; in other states, such as Illinois, they can work just fine. But all courts frown on overly broad agreements. Your noncompetes will be stronger if they apply to employees whose specific expertise—close ties to customers, knowledge of trade secrets—means their defection could cause real damage. If you are in a state where noncompetes are hard to enforce, consider other ways to cultivate loyalty among key employees. When hiring, ask candidates if they are subject to anyone else's noncompetes—potentially saving you from a court battle or from having to ditch someone you've invested in.

This is real life and not The Twilight Zone. I keep repeating this over and over, but think about the true costs of self-help. Compare the cost of having an attorney draft a good non-compete agreement against the costs of no non-compete or a bad non-compete agreement and an employee taking advantage of your unwillingness to get proper legal help.


For another real life story, take a look at this article from Editor & Publisher:

CHICAGO MediaNews Group Inc. CEO William Dean Singleton says he never had a hint that Publisher Par Ridder was planning to decamp from the St. Paul Pioneer Press to the rival Minneapolis Star Tribune -- and allegedly take a ton of confidential material with him.

***

"We let him into everything," Singleton said. "We had a very good relationship with him while he was publisher. In typical MediaNews style, we left him alone to do his job. We give our papers a lot of autonomy."

hat trusting style, he suggested, allowed Ridder to copy and take sensitive documents with him when he left, as the lawsuit alleges. Ridder has said it would be inappropriate to comment during litigation.